25 September 2008

A New Investment Alternative?




With the 'credit crunch' in the UK, many people who have some capital available are finding that it is still not enough for them to buy a property with a mortgage. Now here is an alternative - recently we have had quite a few clients who want to make an investment for the future, but who do not have a large capital amount in order to invest with cash.

They therefore use their available funds for a deposit and costs on a property in Corfu, on which they can obtain a local mortgage, and which they can let during part of all of the summer season to cover the costs of that mortgage. Correctly managed, this should also cover the running costs of the property and leave a margin for upkeep and improvement.

We have clients who have purchased a small property near the beach, with a down payment of around 5,000 euros - a loan of 65,000 euros and a repayment of around 300 euros a month over a full mortgage term, - and the property lets through the summer at weekly rates of 200-500 euros per week. Correctly marketed through one of the internet websites this means that the investment is giving a profit, and she has capital appreciation as well. In the UK they would never have found a property in this price range but here they truly have a 'foot on the property ladder'.

At a higher level, with more expensive property the same applies - loan repayments covered by letting income with good capital appreciation.

HOWEVER - it is important to realise that you cannot go to the bank here and look for a 'buy to let' mortgage as such. You will have to support the application with evidence that your personal income could cover the repayments independently if required. The bank will be interested to know that you plan to let but cannot take this into account when calculating whether or not you can afford to repay the loan. If you apply for a commercial loan then criteria are different.

The most important point when considering this is the letting potential of the property and this is where Corfuhomefinders and Corfu Premier Property can give you advice, having had many years of experience in the holiday letting market here in Corfu.
Diana